Now that debt-laden Kremikovtzi steel mill is awaiting bankruptcy declaration at a July 29 hearing of the Sofia City Court, bidders are busy sweetening their stakes with concrete action plans and commitments for large-scale investments. This includes ArcelorMittal, the world’s largest steel maker and tipped as favourite in the run-up for Kremikovtzi’s controlling stock.

At a July 3 news conference call, Volker Schwich, vice president projects Central and Eastern Europe at ArcelorMittal, announced his company had prepared a first aid plan to stabilise Kremikovtzi over an 11-month period. The month-by-month plan, soon to be filed with Bulgarian authorities and the European Union, sees ArcelorMittal running the plant while in bankruptcy proceedings under the supervision of court-appointed trustees. “Trustees are in need of operational and technical assistance during this so-called transition period for the mill,” Schwich said.

The plan, detailing the supply of raw materials, environmental investments and ways to ensure uninterrupted supply of utility services, mirrors the initial steps of a “rescue plan” ArcelorMittal implemented in Poland.

In a 2004 privatisation tender, the steel giant acquired Polskie Huty Staly (PHS), a conglomerate of seven production units, whose annual production capacity of eight million ton of steel comprises 70 per cent of Poland’s total. Its Krakow plant, similar to Kremikovtzi, specialises in the production of flat steel products.

Since then, ArcelorMittal has closed several obsolete mills, modernised the remainder and erected new ones, the prized addition being the 430 million euro hot strip mill in Krakow. Total spending on production and environmental upgrades amounted to $1 billion, Jacek Wolinsky, Krakow unit director at ArcelorMittal Poland, told Bulgarian journalists in Krakow. As previously reported by The Sofia Echo, ArcelorMittal is ready to invest $500 million into Kremikovtzi steel mill.

The Krakow unit also witnessed the construction of dustvent installations, water purification units and waste damps to ensure it complies with environmental regulations.

As for Kremikovtzi, whose deadline to meet EU environmental standards and procure a complex environmental permit expires in October 2008, ArcelorMittal proposes to spend $30 million until October 2009 and another $120 million in two to three years. If the first aid plan is given the go-ahead, Schwich said, ArcelorMittal will request a grace period for the permit and pursue dust emissions of 70 mg/cu m by June 2009 – the EU target for Kremikovtzi until October 2008 – and of 50 mg/cu m, the EU cap, by 2012. Schwich declined to specify other targets until a later stage.

Social issues, an issue atop the pile of Kremikovtzi’s problems, have also been addressed in Poland. Workforce optimisation came along with severance packages worth 40 000 euro per person, said Jaroslaw Chudek, team leader of strategic HR management section at ArcelorMittal Poland. In addition, former workers were encouraged to form joint stock holdings to procure ArcelorMittal non-core services. There are several dozen of such ventures now, Chudek said, and their scope of activities ranges from transportation to food delivery and catering services. Many of them are no longer entirely reliant on ArcelorMittal orders.

A similar social model could be implemented in Bulgaria as well, the management made clear.

Schwich said that should Kremikovtzi join ArcelorMittal Group, it would do so stripped off its 1.5 billion leva debt burden, just like PHS. Schwich said that chances that Kremikovtzi would avoid insolvency proceedings were minimal although ArcelorMittal had a “Plan B” if the court decided otherwise. The executive declined to elaborate on the alternative.

It will also form part of a natural, as opposed to national, market, which comprises the south east European region.

“In this region, which we have identified as high-growth, ArcelorMittal owns production units in Macedonia and Romania and is currently building a hot strip mill in Turkey,” Schwich said. “If and once with ArcelorMittal, Kremikovtzi will supply Bulgaria, Greece and parts of Romania.”

Raw materials could flow from Ukraine, Russia and other ex-Soviet states, he said.

Currently, ArcelorMittal is in talks with the Bulgarian Government, bondholders and trade unions in their capacity as stakeholders in the Kremikovtzi process. Talks with the Government tackle its position as shareholder of Kremikovtzi and as owner of the mill’s main utility suppliers. Yet a third aspect of negotiations is the “potential steps to be taken at Kremikovtzi during its transition period, between bankruptcy declaration and takeover”.

The Bulgarian Government is yet to announce a procedure to sell Kremikovtzi.